Ballmer boasted that Microsoft sold more than eight million Kinect devices in the 60 days after it hit the market in November.

Kinect lets people control on-screen action with body movements or spoken commands and is priced at 150 dollars.

Microsoft is tapping into Kinect camera and face recognition technology to let people represent themselves in the Live virtual world with animated characters that resemble them and copy expressions and gestures in real time.

The Avatar Kinect feature will be available by mid-year to people who subscribe to Xbox Live "gold" memberships.

Ballmer also used the keynote speech to extol smart-phones running on freshly released Windows Phone 7 software and promise that versions for Sprint and Verizon telecom networks in the United States would be out in coming months.

He also highlighted the array of slick new computers on display at CES running on Microsoft's latest operating system.

"Only the imagination limits what can be done with Windows PCs today: write on them, draw on them, hang them on the wall, touch them, use a wireless keyboard, play a game, and much, much more,"

Ballmer said.

Noticeably absent was any sign of Microsoft plans to take on Apple and Google in the hot tablet computer market.